APAC Expansion And ONE CARE Integration Will Fuel Success

Key Takeaways

• Expansion in APAC and focus on Pet Food growth signal potential revenue growth and increased international market share.
  
• Integration of Probi into ONE CARE enhances health innovations, while potential terpene divestment aims to boost returns and margins.
  
• The divestment, cost pressures, and regulatory challenges may negatively impact Symrise's revenue, margins, and profitability.

Catalysts

Operates as a supplier of fragrances, flavorings, cosmetic active ingredients and raw materials, and functional ingredients in Europe, Africa, the Middle East, North America, the Asia Pacific, and Latin America.

• Symrise's ongoing expansion in high-growth regions and its focus on Pet Food growth, particularly in APAC, signal expected revenue growth and increased market share in international markets.
  
• The integration of Probi into Symrise's ONE CARE initiative is expected to drive growth in health and well-being innovations, enhancing Symrise’s product portfolio and revenue potential.
  
• The strategic review and potential divestment of the terpene ingredients business are aimed at improving the company's return on capital employed and net margins.
  
• Symrise's commitment to innovation in sectors like Fragrances and Scent & Care is expected to foster revenue growth and maintain pricing power through differentiated and higher-value products.
  
• Efficiency gains from centralizing procurement and operations, along with planned cost optimizations, are designed to improve EBITDA margins and free cash flow.

Symrise Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Symrise's revenue will grow by 5.3% annually over the next 3 years.
• Analysts assume that profit margins will increase from 9.6% today to 11.7% in 3 years time.
• Analysts expect earnings to reach €681.8 million (and earnings per share of €4.77) by about May 2028, up from €478.2 million today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as €576.0 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 27.3x on those 2028 earnings, down from 29.7x today. This future PE is greater than the current PE for the GB Chemicals industry at 17.2x.
• Analysts expect the number of shares outstanding to decline by 0.19% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 5.38%, as per the Simply Wall St company report.

Symrise Future Earnings Per Share Growth

Risks

• The divestment of Symrise's U.K. Beverages trading business in 2024 may impact revenue growth negatively, reducing the overall turnover.
  
• The reliance on price adjustments to offset cost increases can potentially lead to customer pushback, impacting net margins.
  
• Soft performance in Pet Nutrition, despite growth in Pet Food Palatability, suggests challenges in consistent revenue growth in this segment.
  
• The volatility and capital-intensive nature of the terpene ingredients business may impact profitability and return on capital employed.
  
• Regulatory challenges, like potential tariffs and evolving tariff regimes, could increase operational costs and affect Symrise's earnings.

Valuation

• The analysts have a consensus price target of €115.182 for Symrise based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €135.0, and the most bearish reporting a price target of just €100.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €5.8 billion, earnings will come to €681.8 million, and it would be trading on a PE ratio of 27.3x, assuming you use a discount rate of 5.4%.
  
• Given the current share price of €101.55, the analyst price target of €115.18 is 11.8% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.